Abbott to Cut Red Tape for Currency-Squeezed Manufacturers

By Jason Scott -
Aug 29, 2013

Tony Abbott, the frontrunner to
become prime minister in Australia’s election next week, said a
coalition government would cut red tape and taxes to help
manufacturers squeezed by an elevated currency.

“We have to try to ensure that at any given level of the
dollar we give manufacturing the best possible chance,” Abbott,
55, said in a telephone interview yesterday ahead of the Sept. 7
election. “We do that by scrapping unnecessary taxes, reducing
red tape, trying to produce a more flexible regulatory
environment.”

Signaling a free-market approach, Abbott said manufacturers
have to find a way to cope with a “market-driven currency.”
That contrasts with opponent Prime Minister Kevin Rudd, who has
pledged a further A$700 million ($624 million) to support
carmakers and styled the ballot as a referendum on the
industry’s future.

The nation’s manufacturers have struggled with a local
dollar that’s traded about 30 percent higher over the past 12
months than its average since floating in 1983. Manufacturing
makes up about 7 percent of the nation’s $1.5 trillion economy,
down from about 14 percent 30 years ago.

Economic management has emerged as the defining difference
between Rudd’s Labor party and the coalition in the election
campaign as growth slows and a mining-investment boom wanes.

“The Australian dollar is a market-driven currency and the
right level for the Australian dollar is the level that the
market puts it at,” said Abbott.

‘Prudent Judgments’

The Rhodes scholar, who has degrees in economics and law,
said it was up to the Reserve Bank of Australia to make
“prudent judgments” on monetary policy and noted the central
bank’s benchmark interest rate was “very low by historical
standards.”

Central bank Governor Glenn Stevens has cut interest rates
by 2.25 percentage points since late 2011 to boost growth in
employment-intensive industries including manufacturing and
construction in the nation’s south and east.

Underscoring the elevated Aussie’s effect on manufacturers,
Ford Motor Co. announced in May it would end production in the
country after nine decades, with the loss of 1,200 jobs. General
Motors Co. (GM)’s Holden division said in April it will cut about 500
positions in Australia, citing the currency’s strength.

Manufacturing Slump

A private gauge released Aug. 1 showed manufacturing
slumped 7.6 points to 42 last month, the biggest decline since
April. Fifty is the dividing line between growth and
contraction.

“Some manufacturing can cope at relatively high levels of
the dollar, other manufacturing finds it very difficult,” said
Abbott, whose coalition has proposed cutting A$500 million from
existing government subsidies to carmakers by 2015. He told
reporters last week his government wouldn’t wave a “blank
check” at automakers.

Abbott has pledged to have legislation in Parliament within
his first 100 days in office to abolish Labor’s mining and
carbon taxes. The coalition plans to remove a A$1.8 billion tax
on company cars, reduce the company tax rate by 1.5 percentage
points to 28.5 percent and cut red tape by A$1 billion a year.

Rudd is selling himself as the best leader to steer
Australia through a downturn as he flags the end of a China-led
mining boom. Spending cuts by an Abbott-led government,
including a plan to slash 12,000 public service jobs, risks
tipping the nation into recession at a time when the RBA is
forecasting slower growth and the Treasury expects unemployment
to hit an 11-year high of 6.25 percent next year, Rudd has said.

Poll Lead

With eight days left before the election, Abbott’s Liberal-National coalition is leading Rudd’s Labor by six percentage
points on a two-party preferred basis, according to a Newspoll
published in the Australian newspaper Aug. 26. Online bookmaker
Sportsbet said yesterday it was already paying out bets on the
coalition winning the election.

A separate poll shows Labor has lost support in its
traditional heartland of Western Sydney. A Newspoll conducted
Aug. 23-28 of five electorates in the region has the coalition
leading 57 percent to 43 percent on the two-party preferred
measure. Abbott leads as the better prime minister, 46 percent
to Rudd’s 40 percent. The survey of 800 voters has a margin of
error of 3.5 percent.

A coalition government would seek strong ties with
Australia’s key ally, the U.S., and its biggest trading partner
China, Abbott said, continuing the policy of past governments.

“There’s nothing inconsistent between Australia having a
very, very strong friendship with the U.S., a strong and growing
friendship with China, and the U.S. and China being friends and
partners rather than rivals,” said Abbott, who has been
opposition leader since 2009.

Foreign Ownership

The coalition has proposed tougher guidelines on foreign
ownership of farmland, and said the threshold for scrutinizing
proposed overseas purchases of agricultural land should be set
at A$15 million, down from the current A$244 million.

Rudd is also calling for a more cautious approach to
foreign ownership of rural land.

Abbott said in July last year that investment by China “is
complicated by the prevalence” of state-owned enterprises.

Asked yesterday to elaborate on that comment, he said that
while some state-owned enterprises operated on a commercial
basis, “others are very much in the arms of the relevant
government.”

“The last thing any sensible country that needs foreign
investment wants to do is antagonize anyone,” Abbott said.
“But you’ve got to be candid and say that we deserve the right
to knock things back if for whatever reason we think that it’s
against the national interest.”